Market Topics

Base Oil Report

Share

The mere word hurricane conjures up an immediate feeling of apprehension, together with images of gale-force winds, torrential rains and torn-up towns.

Cities and refiners along the U.S. Gulf Coast typically prepare for hurricane season by delineating emergency plans and beefing up inventories to cover potential shortages in case of output disruptions.

However, all of these safeguards were almost inconsequential, as nobody was truly prepared for the devastation brought about by a duo of hurricanes in late August and early September: Harvey and Irma.

The immediate impact of the catastrophes on the base oils industry was a tightening of product caused by plant outages, as several refineries and base oil plants located in Texas, where Harvey first made landfall, lay in the path of the storm.

ExxonMobils API Group I/II unit in Baytown; LyondellBasells Group II and naphthenic base oil plant in Houston; Valeros naphthenic facility in Three Rivers, and Motivas Group II unit in Port Arthur all halted operations due to massive flooding.

Not long after the storm, Motiva declared force majeure on all of its base oil grades, and placed orders on allocation as its base oil plant could not be restarted as originally expected, causing considerable crimping of supplies.

Product shipments also suffered delays due to port closures, rail and truck service disruptions, coupled with a lack of raw material availability and electric power cuts.

Even producers that have no manufacturing facilities in the affected areas were impacted, as many operate terminals and distribution centers there.

Phillips 66 and Ergon communicated that there would be potential shipment delays, and Calumet suffered production setbacks because of a shortage of crude oil to feed one of its refineries.

A week after Harvey hit Texas, with tremendous relief efforts and emergency work under way, some refineries were able to gradually restart operations, including ExxonMobils refinery in Baytown and Valeros Three Rivers unit.

But the nightmare did not seem to be over-only days after Harvey ravaged a large swath of Texas and Louisiana, Hurricane Irma devastated several islands in the Caribbean, before touching down in Florida, causing severe flooding in that state, as well as in Georgia, South Carolina, North Carolina and Alabama.

Related Topics

Market Topics